What Is the Acceleration Principle?

The principle of acceleration refers to the theory of the relationship between changes in income or consumption and investment. It is a basic tool for analyzing economic fluctuations, and is used to explain why investment changes in the economic cycle are much larger than changes in the production of consumer goods. The principle of acceleration was first proposed by Avtarion of France and Clark of the United States in 1913 and 1917, respectively. Later, Harold of the United Kingdom detailed the principle of acceleration in his book Business Cycle published in 1936 Discussion. Its basic content is that the total demand for social capital goods is a function of national income or production level. The increase in the demand for and consumption of consumer goods will inevitably lead to "induced investment." The increase in the total amount of capital goods, that is, the net investment will A faster growth rate accelerates growth. Therefore, the relative decline in the growth rate of demand for consumer goods can also lead to economic recession. This principle cannot be established under any conditions. ^[1]

Acceleration principle

Acceleration principle first appeared in Albert Afta

(1)

The acceleration principle applies to any investment. If the growth rate of demand for a commodity decreases, the principle indicates that the demand for investment goods that produce this commodity will also decline. One of the most interesting applications is the construction industry. If the population of a community grows rapidly, the demand for more services than the construction industry provides will rise rapidly, and the construction industry will become hot. If the population continues to grow but slows down, the number of new homes required will fall, and builders who do not realize that the population growth rate has decreased are likely to overbuild and can only sell new homes at a discount.

Another interesting application is inventory investment, also called inventory change. Inventory investment refers to an increase in the amount of a certain inventory, not an increase in the number of varieties of inventory. Suppose that in order to better serve its customers, a retail store always wants to keep the stock and sales roughly equal in each period.

One of the most prominent applications of the acceleration principle is its interaction with the Keynes multiplier. The multiplier indicates that an increase in investment expenditure will lead to an increase in income, which will lead to an increase in consumer expenditure; therefore, it has a multiplier effect on GNP. The acceleration principle shows that an increase in consumption causes an increase in investment. Therefore, the increase in initial investment will result in more consumption due to the multiplier effect, the increase in consumption will cause more investment, and the increase in investment will result in more consumption, and so on. ^[2]

Comparison of multiplier principle and acceleration principle

(1) The multiplier principle explains how changes in investment cause changes in income. In contrast, the acceleration principle explains how changes in income cause changes in investment, that is, the role of income in determining investment.

(2) The multiplier is a coefficient indicating to what extent an increase in investment will cause income to increase; on the contrary, the acceleration factor is a coefficient indicating to what extent an increase in income or consumption will cause investment to increase.

Interaction between multiplier theory and acceleration principle

The issues to be explained by the "acceleration principle" and "multiplier theory" are different. The "multiplier theory" is to explain how small changes in investment can cause huge changes in income, and the "acceleration principle" is to explain how small changes in income can cause large changes in investment. But the economic movements illustrated by the two are mutually influential and complementary. Macroeconomics uses the interaction of the so-called "accelerator" and "multiplier" to "explain" the cyclical fluctuations of the economy.

It is said that under the conditions of the economic crisis, the production and sales volume declines. The role of the acceleration principle will cause the investment to drop sharply, and the effect of the multiplier will cause the production and sales to decrease sharply. Become negative (or negative investment). The interaction of acceleration and multipliers has exacerbated the cumulative process of production shrinkage. Once the capital equipment of the enterprise is gradually adjusted to a level that is compatible with the minimum income, the role of the acceleration principle will stop the negative investment, and a slight improvement in the investment situation will also lead to the growth of income again, so a new cycle will restart. Start. The re-growth of income leads to a new "induced investment" through the role of acceleration; the latter promotes the further rapid increase of income through the role of multipliers, which starts the accumulation process of economic expansion. This accumulation process will push the national economy to the ceiling of "full employment" and bounce back from there to turn into recession. Macroeconomics blames the cyclical fluctuations of the economy entirely on the results of the "acceleration" and "multiplier" interactions between income and investment. Although the so-called "multiplier" effect or "accelerator" effect are some objective mechanisms existing in the reproduction process of socialized production, and will affect the process of capitalist economic fluctuations to a certain extent, the source of cyclical economic fluctuations of capitalism It lies in the capitalist system itself, the fundamental contradiction inherent in capitalism-the contradiction between socialized production and private capitalist possession.